17-03-2018

Ardmore Shipping to focus on MR tankers on bullish outlook – executive

Medium Range clean tankers’ freight rates are likely to get strong support this year, on the back of slower growth in fleet and greater trade in oil products, a senior Ardmore Shipping executive said late Thursday.

“We keep assessing opportunities for further expansion from time to time and as of now, we want to keep ourselves strategically and pointedly focused on the MRs,” Ardmore Shipping Chief Commercial Officer Gernot Ruppelt said on the sidelines of the Asia Pacific Maritime, or APM, shipping conference in Singapore. He was responding to a query on whether the company has any plans to venture into the LR segment.

The trade flow opportunities that are available for the LRs, are also there for the MRs, Ruppelt noted.

He did not rule out the possibility of Ardmore further expanding its MR fleet.

“We will grow whenever we can profitably, when we get the right ship at the right time,” Ruppelt said.

The demand and supply fundamentals are now strong for the MR owners and there are more options in terms of routes on which cargoes can be moved, he said.

The company started operations in 2010, and now has around 22 MRs and six chemical tankers.

He added that once the new sulfur emission norms for marine fuels are implemented in less than two years from now, there will be greater demand to move gasoil across continents.

Even now, there are plenty of opportunities to move oil product cargoes on long-haul routes such as from the Middle East to Europe, North Asia and Africa, he said.

Recently, when there was refinery maintenance going on in South Africa, demand for MRs increased to move oil product cargoes there from the Persian Gulf, he added.

The Persian Gulf-South Africa MR route was Thursday assessed at w187.5 compared with w100 two months ago, basis 35,000 mt cargoes, according to S&P Global Platts data.

He pointed out that similarly, Singapore has been running low on inventories of gasoil and this pushed up demand for ships on the Persian Gulf-Singapore route.

“A very positive trend is evolving as the US is not only exporting crude but its product exports also showed an annual growth of over 4% last year,” he said.

The Houston-Amsterdam gasoil route has shown tremendous increase in volumes in the last five years, providing a greater opportunity for longer ton-mile demand for product tankers, Ruppelt said.

Ton-mile demand is calculated by multiplying the volume of cargo moved in metric tons by distance traveled in miles. Covering a longer distance implies diminished availability of ships even if the total size of the fleet remains the same, or conversely, it offsets the increase in supply of tonnage.

Global oil consumption is also on the rise as there are almost twice as many car sales now in China than in the US, he said.

Use of lower sulfur fuels and blending with biofuels creates more demand for product tankers, he noted.

SUPPLY DEMAND FUNDAMENTALS

“The outlook for MRs is more compelling than ever because the pace of delivery of newbuildings is slowing down. Placing of new orders is also now slower,” Ruppelt said.

He added that fundamentals haven’t been better for MRs for a long time, as now there is more demand for longer voyages and expansion of fleet is also at a slower pace.

Around 20% of the fleet is more than 15 years old and there are close to 200 tankers that are in the 20-25 years age bracket, Ruppelt said.

The number of ships in the small range and medium range, in the 10,000-60,000 dwt category, grew by 4.5% last year, compared with 6.5% growth in 2016, according to the estimates of Q88 LLC, a shipping technology solutions provider that tracks more than 8,500 tankers on its platform. Typically, most of the ships get scrapped only after they attain the age of 15 years and above. Scrapping of ships enables a healthier balance of supply and offsets the expansion of fleet due to delivery of new buildings.

Ruppelt said many of these old ships will be difficult to operate as the new norms on ballast water treatment and use of lower sulfur fuels are implemented. The International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention entered into force in September last year, while the new rules for lower sulfur in marine fuels will be implemented from the beginning of 2020.

It will be uneconomical to install new ballast water treatment systems on old ships that are on the verge of retirement and similarly “it is out of question to install scrubbers on them to tackle high sulfur fuels, as it will be too costly,” Ruppelt said.

“Non-compliance with regulatory norms is not an option as those ships that don’t comply will be heavily discounted in the freight market,” he said.

From the requirement side, oil demand is expected to increase by 4%-5% annually, he added.

“Refinery expansion and dislocation, increasing complexity of trade, will all push up the demand for tankers to move cargoes,” he noted.

Source: Platts

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